2016: P2P’s record year

THE UK’S largest peer-to-peer lending platforms saw record growth last year, as commentators predict that 2017 will be “make or break” for the industry.

The eight members of the Peer-to-Peer Finance Association (P2PFA), Funding Circle, Zopa, RateSetter, Lending Works, LendInvest, ThinCats, Landbay and MarketInvoice, collectively lent around £2.92bn last year, according to data submitted to Peer-to-Peer Finance News by the platforms.

This is a mammoth 30 per cent increase compared to total lending volumes in 2015.

“There have been some minor nuclear bombs this year – socially, economically, politically – which should have threatened alternative finance,” said Lex Deak, chief executive and co-founder of crowdfunding aggregator OFF3R.

“I think the fact that the UK’s P2P finance industry has managed to withstand all of these shocks and had its best year yet is testament to the viability and resilience of the asset class.”

Data from the P2PFA published on Wednesday confirmed P2P’s stellar year. Cumulative lending among the P2PFA members has risen to £7.3bn, a 67 per cent increase on the £4.3bn lent by the end of 2015.

OFF3R recently launched its own P2P index, which found that a slightly different mix of nine major platforms, Assetz Capital, Zopa, Landbay, RateSetter, ArchOver, MarketInvoice, Lending Works, Funding Circle and ThinCats, lent over £278m in October, breaking the record for the largest amount lent in a single month.

And data from individual lenders shows that the growth trajectory continued later into the year. Funding Circle broke its own record to lend £112.9m in November, marking the first time ever that a European P2P platform has passed the £100m mark in monthly funding.

“There are some examples of incredible growth in the P2P lending space in the last few months,” said Tom Bull, director in EY’s fintech practice. “It’s a result of a real focus on distribution channels, including both direct business and working in partnership with banks. If the platforms can continue this focus in 2017 it could be another record-breaking year.”

Deloitte predicts the UK P2P market could be worth as much as £35.5bn by 2025 and argues that banks could benefit from adopting some of their best practices, particularly those around customer experience.

“P2P fills a gap in the market,” said Neil Faulkner, founder and managing director of P2P research firm 4th Way. “For investors, it’s been fantastic, offering far better returns than they would get elsewhere.”

However there are predictions that P2P’s rapid growth could start to slow down if economic conditions worsen.

“We’ve always been massively supportive of the P2P market,” said Jamie Kerr, head of entrepreneurship at the Institute of Directors.

“However, I think 2017 will be make or break. Platforms haven’t really gone through the credit cycle before and it will be interesting to see what happens if investor confidence wanes due to Brexit once Article 50 is implemented.”

Assetz Capital saw impressive 350 per cent year-on-year growth in 2016, having lent out £104m by mid-December, but chief executive Stuart Law warned that platforms could hit a “glass ceiling” in terms of origination volumes.

He cited the example of P2P giant Zopa, which stopped taking new money in December due to a shortage of borrowers.

“2016 is when reality hit on countless fronts,” he said. “Is there a limit to how much platforms can originate?”